Kazakhstan to Capitalize on Crypto Mining Boom; Introduces New Tax on Bitcoin Mining Starting Jan 2022

Kazakhstan is becoming a hot spot to mine cryptocurrencies, especially after the crackdown on crypto mining in neighboring country China, and the authorities want to capitalize on this growing trend. As of April 2020, Kazakhstan accounted for 6.17% of Bitcoin’s global hash rate,according to Cambridge Bitcoin Electricity Consumption Index. While cryptocurrencies already exist in Kazakhstani legislation as “unsecured digital assets,” their circulation in the country is prohibited. In June 2020, “digital mining” was also introduced into the law. Amendments to the tax code have been sent to the Senate, whose supporters believe this will become an incentive for the mining sector in Kazakhstan. In 2020, crypto mining brought in almost 10 billion tenges in taxes (over $23 million) and $160 million in export earnings, noted local publication. According to the Ministry of Digital Development, Innovation, and Aerospace Industry, 17 digital mining farms are in the country. Back in Feb, one of the Ministry's officials announced the plans to “bring” 1% of the world's crypto turnover to Kazakhstan. As of now, there are no special taxations for miners, but an amendment was proposed by Majilis deputy Albert Rau which introduces a new tax for mining farms. The new tax proposed will be calculated at the rate of 1 tenge per 1 kilowatt-hour of electrical energy consumed in digital mining. This bill will come into effect on January 1, 2022, if adopted in its current form. The bill's main goal is to “bring this sector out of the shadows,” said Rau. According to the bill, the amendments will allow the authority to administer the activities of miners. Information on cryptocurrency miners will be collected by the "authorized body in the field of information security” every quarter, making it possible to find mining farms. If necessary, power engineers can also find them by their stable high daily electricity consumption, Rau said. Miners, meanwhile, are opposed to the new tax. Back in May, Alan Dordzhiev, President of the Association of Blockchain and Data Center Industry in Kazakhstan, said that miners are already paying several billion tenges in various taxes.

“The urgency in adopting the amendments is alarming investors who may leave the industry” and “cause regulatory risks for foreign investors with a further loss of interest in reinvesting in the industry.”